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Venezuela Rent Control: Is the comparison with the UK as Caracas as it seems?

Tory MP Grant Shapps recently criticised Labour’s plans to introduce controls over rent increases as ‘Venezuelan-style rent controls’. In Venezuela rent control essentially involves rent levels being set as a percentage of the value of the property. That is, a value determined by the Housing Ministry (so typically below the market value). The comparison is therefore extreme and, well, wrong. But we still thought it would be interesting to see how the two markets do stack up against each other.

There is one immediate obstacle. Venezuela essentially has four exchange rates! The three official rates – fixed by the government – are very low. Then there is a major black market rate, which gives anyone paid in dollars a far, far better price. These systems mean Venezuela could be seen as rather expensive (officially) or very cheap (not so officially…).

Using an official exchange rate, comparison website Expatistan estimates housing to be 5% more expensive in Caracas than in London, even with the rent controls. Using the black market rates, however, the cost of housing is estimated to be 91% cheaper in Caracas than in London. This gives you a good idea of the difference between the rates!

What about rent prices specifically? Numbeo, which uses user-contributed data to calculate costs of living, has overall average rent prices in Venezuela as 10.22% lower than those in the UK, presumably using the most generous of the exchange rates (known as Sicad II). The fact that this data is user-contributed also may mean it includes ‘black market’ rentals outside of rent control. Average prices look something as follows:

Average UK Rent

Average Venezuela Rent

Difference

Apartment (1 bedroom) in City Centre

£687.96

£714.60

+3.87 %

Apartment (1 bedroom) Outside of Centre

£571.44

£395.26

-30.83 %

And as for the capital cities, Numbeo has average rent prices in Caracas as 34.63% lower than in London.

Average London Rent

Average Caracas Rent

Difference

Apartment (1 bedroom) in City Centre

£1,479.35

£967.14

-34.62%

Apartment (1 bedroom) Outside of Centre

£919.52

£467.39

-49.17%

Gross rental yields, however, are slightly above the UK average: roughly 8-11% in Caracas and 6-8% elsewhere. This compares to a range of around 3-7% in London and 4-9% across the rest of the UK. But before you decide to up sticks and go for a buy to let in Venezuela, you should know it’s a bit of a non-starter! There is the constant threat (and reality) of bans on money leaving the country, rampant economic instability and inflation, and laws heavily weighted in favour of tenants (such as landlords being forced to offer their properties for sale to tenants who have lived in them for more than 20 years!).

Their strict rent controls have also done nothing to help their housing crisis either. According to one study by the Chamber of Metropolitan Real Estate, the number of rental properties reduced by 72 percent between 2010 and 2012 after the controls were enacted. The extent of Venezuela’s crisis is so bad that the government is being forced into some – ahem! - very creative moves to help out. A bit crazy maybe, but with the state of the UK’s housing crisis are we really ones to judge?!